Major Energy Entities - Establishment of Inquiry and Report

That the House refers the following matters to Government Administration Committee A for inquiry and report -

(1) the financial position of the major energy entities taking into account their half yearly financial statements;

(2) factors impacting on the future profitability and financial performance of the major energy entities;

(3) implications and potential impacts of AER determinations on financial performance of the major energy entities;

(4) the impact of small scale energy generation on the major energy entities;

(5) the impact of Federal Government decisions regarding renewable energy policy on the major energy entities; and

(6) any matters incidental thereto.

This motion seeks to support the Legislative Council to undertake an inquiry into the financial performance and challenges facing the major energy entities in a timely manner. These entities are very important components of the state sector. The motion calls on Government Administration Committee A to inquire into and report upon the financial position of the major energy entities, taking into account -

· their half-yearly financial statements,

· factors impacting on the ongoing future profitability of the major energy entities,

· the implications and potential impacts of Australian energy regulatory determinations on the financial performance of the major energy entities,

· the impact of small-scale energy generation on the major energy entities, and

· the impact of Federal Government decisions regarding renewable energy policy on the major energy entities.

The timing scrutiny of government actions and government businesses is an important aspect of our role. Such scrutiny is vital, to enable the Parliament and the people of Tasmania to be informed of any concerns regarding the performance of government businesses, or indeed any positive aspects of their performance, and it is particularly important that we are informed in a timely manner.

Before I speak directly to the importance of conducting this inquiry, I will inform members as to why I have taken this approach in seeking the support of the House to refer this matter to the Government Administration Committee A.

Standing orders for the sessional committees enable Government Administration Committees to initiate such inquiries on their own motion. Members of Government Administration Committee A would be aware that I have sought support for this important inquiry.

The committee has been locked in a 3-3 vote on this matter. As a result of the voting deadlock, I sought advice from you, Mr President, and from the Clerk. My advice was to bring this motion before the whole House for referral, as this is a matter that would be entirely appropriate for the Government Administration Committee A to inquire into, and an appropriate action to take. I have not sought to establish a select committee in this circumstance. I particularly followed the advice from you, Mr President, that we use the committee established for this purpose.

In the event that current members of the Government Administration Committee A do not wish to participate in the inquiry, they may either seek a substitute member from Government Administration Committee B or can form a subcommittee of Government Administration Committee A to conduct such an inquiry. When the terms of reference fall clearly within the scope and purpose of Government Administration Committee A, this is the most appropriate approach.

I wish to inform members, particularly those who are not members of Government Administration Committee A, of my reasons for seeking support for the motion. The borrowings of the energy entities represent 95 per cent of total state sector borrowings, excluding TasWater, which is owned by local government. I repeat it as this is a really important matter: the borrowing of the energy entities represents 95 per cent of the total state sector borrowings. Judging by the budgeted tax and dividend payments to government, we know Hydro Tasmania's profitability is near zero.

It is important for us to understand what assumptions underpin the ability of the major energy entities to deliver returns to government as budgeted, and what the downside risks to both companies are. It is very clear that changes to energy policy, both within Australia and internationally, pose a number of serious threats to the ongoing profitability and future direction of the major energy entities, particularly Hydro Tasmania. This inquiry would enable those important matters to be explored and discussed in a meaningful and informative way. These businesses are very important to the future of the state, and we need to understand the challenges as well as the opportunities they face. We must explore these challenges and opportunities more regularly and assess the risk management strategies the energy entities have in place. We also need to better understand what opportunities exist in the future and what actions are taken to capitalise on these opportunities.

We know that the major energy entities' business plans have been formalised and lodged with government, and so it is also timely to reflect on and review these and the financial position of these entities on a regular and ongoing basis. I emphasise that the aim of the inquiry is a familiarisation with the financial accounts and the challenges facing, and opportunities presented, to both businesses. This is not a witch-hunt. This will enable us to build a better, more informed basis for parliamentary scrutiny of such a critical component of the state sector, rather than the biennial questioning for two to three hours, which inevitably is a wasted opportunity, due mainly to our lack of familiarity with the ins and outs of the operations of these organisations.

This process will assist members to gain a better and more thorough understanding of how these entities operate and what their strengths and weaknesses are. An article published in The Sydney Morning Herald on 9 March also reaffirms my view of the need for this inquiry. The article titled, 'The sun isn't shining on "old energy" sectors', was authored by Michael West, and made some relevant and, in many ways, concerning observations. I will quote a couple of sections from this article. It said -

Electricity prices have run too high. Renewable energy is rapidly getting cheaper, more efficient, and power companies are desperately trying to lock in customers and stave off the incursion from renewables.

Mr West also notes changes in the international arena, and these changes will present a risk and challenge to our energy entities in Tasmania. I quote again from the report -

Meanwhile, it has been under-reported here, but India has detailed a radical shake-up in energy policy, which has ramifications for Australia.

Handing down the nation's budget, the Indian Finance Minister announced a five-fold increase in renewable energy installations, higher taxes on coal and a cut in excise on solar hot water systems.

I encourage members to read the whole article as it is another commentary on this topic. It is vital that the energy entities in their energy policy development consider the decisions of other jurisdictions and other countries as they would inevitably impact on Tasmania.

I also note an article that I read on the RenewEconomy website, an independent website launched in 2012 to discuss the ideas, and analyse the trends, the new technologies and the policies that will drive this transformation. I quote a couple of sections from a report titled 'Tasmania missing $2.8bn opportunity for big clean energy exports'. I recommend the entire report to all members as it is very interesting.

The policy uncertainty surrounding carbon pricing, and more recently the Renewable Energy Target, has effectively quelled appetite for investment in new low emission generation in Australia over the last few year.

Further, the author says:

... we have glimpsed an opportunity for Tasmania in a carbon constrained world as a net energy exporter. Not without some sense of irony, Tasmania's long investment in hydro makes it the greenest, low-emission power supplier in Australia by a very long margin.

The report goes on to discuss the benefits and challenges of being connected to the National Electricity Market by the Basslink cable. It also considers Hydro Tasmania's opportunities to manage electricity systems in a carbon‑constrained world and benefit from wind power generation opportunities. The report further says, and I quote:

But the carbon pricing years show how Basslink also provides Tasmania with the infrastructure for sustained export of electricity, should it increase generation capacity.

...

Indeed, the inherent value of wind is increased by coupling with a large dispatch‑able storage system such as hydro. Consequently Tasmania potentially provides one of the best investment opportunities for wind generation in Australia.

And further:

Such an investment would cost about $2.8 billion for the generation capacity plus some for the local transmission extension to connect into Basslink.

... the clincher for Tasmania - the investment could be entirely paid for by mainland consumers. As we glimpsed during the carbon tax years, the northward flow [of] electrons is one way of exciting the southward flow of dollars for much needed investment in Tasmanian industry.

Mr President, we cannot have our heads in the sand. It is incumbent on us in this place to ensure our energy entities have an eye to the future and a plan to deal with the current and emerging issues and challenges. The possible job creation that could flow from such investment is significant. It is important that we as members of parliament, particularly in our role of government business enterprise scrutiny, understand what our major energy entities are doing in this area. Are they looking to the future? How are they mitigating their risks? What are the major risks and challenges they face? What are the real opportunities for growth, and how are they responding to these?

Timely scrutiny not only enables these issues to be aired but it also requires the energy entities to demonstrate their planning and risk management priorities and actions. Scrutiny through this process is different from GBE scrutiny hearings and is one of the main reasons the Government Administration Committees were established. I believe we have a responsibility, indeed it is incumbent on us, to use the committee system to promote an understanding of public policy issues and challenges before us.

Arguably our role should be proactive, not merely reactive when something goes wrong. It should also provide opportunities for the earlier detection and scrutiny of emerging challenges, rather than being informed after the event. We need to understand how the major energy entities will manage risk and how they plan to respond to national and international changes in energy policy.

It is vital that we take the opportunity to ensure Tasmanian energy entities are not captured by the past, focusing on old energy policy and practices, potentially failing to move in a timely manner. After all, we are all stakeholders in this and the state's sector bottom line heavily depends on their ongoing profitability.

In seeking support for this motion I ask members to consider the following questions. Is this an appropriate and reasonable inquiry to take? Is it important that we as elected members participate in the scrutiny of government businesses in a regular and informed way, thus adding to our understanding of the operations and the financial sustainability of these businesses? Is it important to engage in public debate and increase the awareness of the general public about the operations and financial sustainability of our government businesses? Is it important to have regular scrutiny of government businesses that hold 95 per cent of the state sector's debt? Is there a range of other factors occurring internally within Tasmania, nationally and internationally that could, or would, impact on the ongoing financial performance of these entities, and if so, what are our energy entities doing to address these challenges? If any of these questions are answered in the affirmative, it is evident that such an inquiry is warranted and appropriate.

Mr President, I seek the support of honourable members for this motion.

Closing address - following contributions from other Members

[11.48 a.m.]

Ms FORREST (Murchison) - Mr President, I thank members for their contribution and I will explain a few points. I am a little disappointed other members did not speak to give an indication of what their concerns were, if they have any. I will address the ones that have been raised, that is all I can do.

I find it interesting that members who have spoken against the motion have acknowledged the need to do this. I want to reiterate this is the advice I took from the President, to go down this path, because these committees were established for this purpose. If we start re-establishing a range of select committees on topics where this sort of thing happens, we undermine the whole purpose of having Government Administration Committees and wonder why we bothered.

It was very clear when we supported that in 2010 and 2014, that there was a need for this sort of process - a committee structure that is resourced and available to do this sort of thing, and you can conduct more than one inquiry at a time. A few years ago Government Administration Committee A conducted an inquiry into Forestry Tasmania, and then Tasracing, almost one after the other, very close together, if not overlapping. They were both important inquiries and produced good reports. The advice on this came because we have these committees set up.

As far as breaking a deadlock, we need a process and this is the process. The member for Apsley would be well aware that when I was chair of the Subordinate Legislation Committee, I made it very clear, and the member for Apsley has done the same. We have a high likelihood of the same thing happening in the Subordinate Legislation Committee if we have a vote on something because we have three Liberal members on that committee. If it is a vote that is going down to the wire, it is almost inevitable it will go 3-3 or -

Mrs Hiscutt - I did not say that this was necessary. I said it was not necessary when you started.

About Ruth Forrest

Ruth was born in Burnie in 1962. She was raised on a farm at Riana and has lived on the North West Coast all her life. She attended Riana Area School, Ulverstone High School and Hellyer College and afterwards worked as a nurse and midwife in Burnie until she was elected to the Legislative Council in the Parliament of Tasmania in 2005. Ruth was re-elected in 2011. Ruth lives in Wynyard and spend a lot of time traveling within her electorate including Circular Head, the West Coast, Wynyard and King Island.